Reports » Malaysia

Malaysia stock market and companies daily report (January 09, 2013)

Contributed by Shares Investment

Perdana Petroleum To Secure More Contracts
Perdana Petroleum is expected to seek more long-term charter agreements after having secured a RM430 million contract to provide Petronas Carigali with four anchor handling tug supply units. According to one analyst with RHB Research, Perdana could secure a few more long-term charters for its other offshore support vessels (OSVs). RHB has maintained its ‘outperform’ rating on Perdana with fair value of RM1.31. Public Investment Bank on the other hand was more optimistic in its research report on Perdana, raising its target price to RM1.50 from RM1.31. This was based upon expectations that the new contract of RM430 million will boost bottom line by 30 percent in FY13 and 24 percent in FY14. Perdana also announced on Friday that it had been awarded two contracts worth a total of RM70 million for the provision of a workboat and workbarge for two separate firms. The news however has not convinced OSK Research to revise its rating on Perdana. Instead, the company has been downgraded to ‘neutral’ from ‘buy’, given the limited upside to its fair value of RM1.17.
Significance: According to OSK research, key re-rating catalysts include Dayang Enterprise increasing its stake in Perdana Petroleum and improving charter rates above US$2.0 per bhp across its vessels. Currently, even with the news on Petronas contract, analysts have priced Perdana’s charter rates at about US$1.90-2.00 bhp per day.

Top Glove To Expand Production Volume By 10 Percent
Top Glove Corporation aims to increase its total volume production by 10 percent this year, via its capacity expansion of 52 production lines by August. Managing director K M Lee considers the extra 10 percent target this year to be a substantial feat for the company as it has expanded between 10 and 15 percent last year. On capital expenditure, Lee said the group has allocated RM200 million this year, with RM120 million to be spent on the capacity expansion plan, including the installation of automotive machinery. The remaining RM80 million will be allocated to its rubber plantation in Indonesia, which will have its first phase of planting in October. “The overall investment cost for this venture is RM450 million over 14 years, and we expect positive cash flow in the 10th year,” he said, adding that the group expects the first tapping to be in the year 2020. Meanwhile, Chairman Tan Sri Lim Wee Chai said the introduction of the minimum wage policy is likely to hike up its labour cost by 50 percent. Consequently, the group will increase its glove prices by 3-5 percent, depending on the type of product.
Significance: Top Glove currently controls about 25 percent of global market share, and aims to achieve 30 percent by the year 2015, driven by rising demand for rubber gloves and improved operational efficiency.

Salcon Ventures Into Property Development
Salcon, the water and wastewater engineering services provider, plans to venture into property development via its recent acquisition of land worth RM99.7 million in Johor Bahru. Nusantara Megajuta, Salcon’s 50.01 percent owned unit has proposed to acquire two parcels of leasehold commercial land that has a total land area of approximately 51,476 square metres. The land is within easy access and neighbouring the upcoming mixed residential and commercial developments known as Kebun Teh Commercial Centre and Zennith Suite Service Apartment. Salcon plans to develop the land into a mixed residential and commercial project to be named, JB Festival Mall and Service Apartments. The project which comes with a gross development value of about RM1.2 billion and a total development cost of around RM926 million, is expected to generate a gross profit of roughly RM234 million. Commencing in the first quarter of 2014, the project is target to be completed by the fourth quarter of 2019.
Significance: The proposal is part of the company’s plan to diversify its revenue sources to reduce the group’s sole dependency on its core business. Salcon expects the property development to contribute 25 percent or more to its net profits in the future. The company will continue to seek and secure more property development projects in the long term.